Howard Marks Says No Asset Looks Cheap in Present Scenario



Howard Marks in an interview with CNBC

In an interview with CNBC’s Halftime Report on Thursday, August 10, 2017, Howard Marks, billionaire value investor and founder of Oaktree Capital Management, shared his views on the following:

  • market valuation
  • risk involved in the market
  • FANG stocks
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Marks on valuation

Marks, who warned in 2007 of a financial crisis, said in the CNBC interview, “Asset prices are high across the board.” The bond market (BND) has already shown a strong 35-year bull market. If we look at the performance of the US ten-year Treasury yield, we see that the yield has been on a downward slope in the last 35 years. Yield and bond prices are inversely related. So the ten-year Treasury yield is signaling that bond prices have reached a much higher level.

A bond bubble could increase risk in the market (SPY) (QQQ). Marks said we might see a bond bubble burst in the near term. He said he can’t predict exactly when it will happen. He’s not advising investors to get out of the market but rather to maintain caution.

If we analyze the performance of the stock market, we can see that the S&P 500 index (SPY) (IWM) is trading at a higher forward price-to-earnings multiple of 18.0x than its historical average of 15.0x. The index also showed a strong movement in the past year, rising nearly 14.2%. According to Marks, the rally in the stock market is mainly driven by liquidity in the economy (VFINX).

In the next part of this series, we’ll look at Marks’s views on the market movement.


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